TaxationWork  $$  Experience 
In  Ohio 


By  ALLEN  R.  FOOTE 

PRESIDENT  OHIO  STATE  BOARD  OF  COMMERCE 
PRESIDENT  INTERNATIONAL  TAX  ASSOCIATION 


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A  Paper  Submitted  to  the  Fourth  International 
Conference  on  State  and  Local  Taxation, 
Held  At  Milwaukee,  Wisconsin, 

Aug.  30th  to  Sept.  2nd,  1910 


Published  by  the 

INTERNATIONAL  TAX  ASSOCIATION 


Columbus,  Ohio 


29  Broadway,  New  York  City 


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Table  of  Contents 


Pag\ 

The  Ohio  Constitution . 

Amended  Constitution:  Exemption  of  Public  Bonds . 

Galled  by  Constitutional  Limitations:  Efforts  to  Amend  the  Con¬ 
stitution  . \ . 


Growth  of  the  Vote  in  Favor  of  Adopting-  the  Taxation  Constitu¬ 
tional  Amendment  . 

Relief  in  Sight:  A  State  Constitutional  Convention . 

Efforts  to  Enforce  the  General  Property  Tax  by  a  Uniform  Rule: 

The  Tax  Inquisitor  Law . 

Decennial  Appraisement  of  Real  Property . 

Quadrennial  Appraisement  of  Real  Property . 

Duty  of  Assessors . 

Publication  of  Assessments . . 

Penalty  for  Misconduct . 

Quadrennial  County  Boards  of  Equalization . 

County  Boards  of  Revision . 

City  Boards  of  Review . 

Powers  and  Duties  of  the  State  Tax  Commission  of  Ohio . 

Penalties — Act  of  May  19,  1910 . 

Full  Valuation:  No  Increase  in  Taxation . 

Sentiment  in  Favor  of  Full  Valuation  and  a  Low  Tax  Rate . 

Public  Officials  Must  be  Sustained  by  an  Intelligent  Public  Senti¬ 
ment  . . . 

Correction  of  Original  Assessments  the  Only  Equalization  Required 

The  Horizontal  Method  of  Equalization  Condemned . 

Annual  Assessments  Necessary  for  Economical  and  Accurate  Work. 
A  Notable  Occasion:  Eighteen  Hundred  Newly  Elected  Assessors 

of  Real  Property  in  Conference . . 

Rules  and  Suggestions  for  the  Assessment  of  Real  Property . 

Recommendation:  A  Committee  to  Compile  a  Book  of  Tables,  Rules 

and  Directions  for  the  Assessment  of  Real  Property . 

An  Astounding  Proposition:  Exploitation  of  Tax  Assessment  Work 

by  a  Private  Corporation  for  Profit . 

The  Assessment  of  Property  for  Taxation  is  a  Governmental  Func¬ 
tion  . 

Position  of  Real  Estate  in  the  Taxation  System . 

Causes  and  Effects  of  High  Tax  Rates . 

Custom  Favors  Tax  Evasion  by  Undervaluation . 

Dishonesty  Rewarded — Honesty  Penalized . 

Tangible  Savings — Intangible  Losses . 

Cumulative  Savings  and  Losses . 

Savings  by  Undervaluation  Increase  in  Proportion  to  the  Value  of 

the  Property  Affected . 

Greater  Gains  Can  be  Made  by  Full  Valuation,  Reduced  Tax  Rates 

and  Limited  Expenditures  than  by  Undervaluations . 

An  Unsuccessful  Attempt  to  Reduce  the  Taxation  of  Real  Property 

by  the  Impositon  of  Excise  Taxes . 

The  Result  of  Sixty  Years  of  Experience . 

Future  Work  Guided  by  Experience . 

General  Conclusions  . 


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Taxation  Work  and  Experience  In  Ohio' 

By  ALLEN  R.  EOOTE, 

President  Ohio  State  Board  of  Commerce. 

President  International  Tax  Association. 

_ 

THE  OHIO  CONSTITUTION. 

The  Constitution  of  Ohio  was  adopted  in  1851.  The  taxation 
provisions  contained  in  that  document  are  as  follows: 

“Article  XII.  Section  2.  Laws  shall  be  passed,  taxing 
by  a  uniform  rule,  all  moneys,  credits,  investments  in 
bonds,  stocks,  joint  stock  companies,  or  otherwise;  and 
also  all  real  and  personal  property  according  to  its  true 
value  in  money,  but  burying  grounds,  public  school  houses, 
houses  used  exclusively  for  public  worship,  institutions  of 
purely  public  charity,  public  property  used,  exclusively  for 
any  public  purpose,  and  personal  property,  to  an  amount 
not  exceeding  in  value  two  hundred  dollars,  for  each  in¬ 
dividual,  may,  by  general  laws,  be  exempted  from  taxation; 
but  all  such  laws  shall  be  subject  to  alteration  or  repeal; 
and  the  value  of  all  property,  so  exempted,  shall,  from  time 
to  time,  be  ascertained  and  published  as  may  be  directed 
by  law.” 

V 

'  AMENDED  CONSTITUTION:  EXEMPTION  OF  PUBLIC  BONDS. 

v  This  Constitution  was  amended  in  1905  so  as  to  exempt  all  Ohio 
'  c  state  and  municipal  bonds  from  taxation. 

^  The  section  as  amended,  and  as  it  is  now  incorporated  in  the 
:  Ohio  Constitution,  is  as  follows  (the  words  of  the  amendment  are 
^  printed  in  bold  face  type) : 

“Article  XII.  Section  2.  Laws  shall  be  passed,  taxing 
by  a  uniform  rule,  all  moneys,  credits,  investments  in 
bonds,  stocks,  joint  stock  companies,  or  otherwise;  and 
C  _ 

XA  paper  submitted  to  the  Fourth  International  Conference  on  State 
"  and  Local  Taxation,  held  at  Milwaukee,  Wisconsin,  August  30th  to  Sep¬ 
tember  2d,  1910. 

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•p  36668 


also  ail  real  and  personal  property  according  to  its  true 
value  in  money,  excepting  bonds  of  the  State  of  Ohio, 
bonds  of  any  city,  village,  hamlet,  county,  or  township  in 
this  state,  and  bonds  issued  in  behalf  of  the  public  schools 
of  Ohio  and  the  means  of  instruction  in  connection  there¬ 
with,  which  bonds  shall  be  exempt  from  taxation;  but  bury¬ 
ing  grounds,  public  school  houses,  houses  used  exclusively 
for  public  worship,  institutions  of  purely  public  charity, 
public  property  used  exclusively  for  any  public  purpose, 
and  personal  property,  to  an  amount  not  exceeding  in  value 
two  hundred  dollars,  for  each  individual,  may,  by  general 
laws,  be  exempted  from  taxation;  but  all  such  laws  shall 
be  subject  to  alteration  or  repeal;  and  the  value  of  all 
property,  so  exempted,  shall,  from  time  to  time,  be  ascer¬ 
tained  and  published  as  may  be  directed  by  law.” 

GALLED  BY  CONSTITUTIONAL  LIMITATIONS:  EFFORTS  TO 
AMEND  THE  CONSTITUTION. 

The  people  of  Ohio  have  been  galled  beyond  the  point  of  patient 
endurance  by  constitutional  limitations  upon  the  power  of  the  legis¬ 
lature  to  deal  with  the  subject  of  taxation. 

Five  times  the  people  of  Ohio  have  sought  relief  from  the  in¬ 
flexible  rule  imposing  the  general  property  tax  upon  them  by  con¬ 
stitutional  provisions,  by  submitting  constitutional  amendments  to 
the  people,  designed  to  permit  the  classifying  of  all  subjects  of 
taxation  in  conformity  with  their  economic  characteristics.  The 
amendment  suffered  defeat  in  every  instance,  because  the  constitu¬ 
tion  provides  that  a  constitutional  amehdment,  to  be  adopted,  must 
be  approved  by  a  majority  of  all  votes  cast  at  the  election  at  which 
it  is  submitted  to  the  electors  for  their  action.  Under  this  pro¬ 
vision,  any  elector  casting  a  vote  for  state  officials  but  neglecting 
to  vote  on  the  constitutional  amendment  practically  voted  against 
the  amendment.  As  a  result,  every  effort  to  amend  the  Constitu¬ 
tion  so  as  to  cause  it  to  permit  the  classifying  of  all  subjects  of 
taxation  in  conformity  with  their  economic  characteristics  has  been 
defeated  by  counting  those  neglecting  to  vote  on  the  proposition  as 
having  voted  against  it.  In  every  instance,  of  the  votes  cast  on 
the  proposition,  there  was  a  clear  majority  of  votes  in  favor  of  the 
adoption  of  the  amendment. 


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GROWTH  OF  THE  VOTE  IN  FAVOR  OF  ADOPTING  THE  TAXA¬ 
TION  CONSTITUTIONAL  AMENDMENT. 

The  total  vote  in  favor  of  the  adoption  of  the  proposed  taxation 
constitutional  amendment  has  increased  with  each  effort  to  secure 
its  adoption.  The  affirmative  vote  has  been  as  follows: 


1889,  total  vote  in  favor .  245,438 

1891,  total  vote  in  favor .  303,177 

1893,  total  vote  in  favor .  322,422 

1908,  total  vote  in  favor .  326,622 

1908,  total  vote  in  favor .  339,747 

1908,  total  negative  vote .  95,867 


RELIEF  IN  SIGHT:  A  STATE  CONSTITUTIONAL 
CONVENTION. 

Taught  by  this  experience,  those  favoring  amending  the  Consti¬ 
tution  have  abandoned  the  attempt  to  secure  the  adoption  of  a 
special  taxation  amendment.  They  are  now  endeavoring  to  secure 
the  adoption  of  a  proposition  calling  a  constitutional  convention  to 
draft  a  new  state  Constitution. 

The  legislature  has  submitted  this  proposition  to  the  electors  of 
the  state,  to  be  voted  on  at  the  November  election,  1910.  It  re¬ 
ceived  the  unanimous  endorsement  of  the  Democratic  party  at  its 
state  convention  held  in  Dayton,  June  22,  1910;  and  of  the  Repub¬ 
lican  party  at  its  state  convention  held  in  Columbus,  July  26,  1910. 

The  non-partisan  action  of  the  legislature  and  of  the  Democratic 
and  Republican  parties,  gives  assurance  that  this  proposition  will 
be  adopted  and  that  a  State  Constitutional  Convention  will  be  held 
in  1911. 

It  is  believed  that  through  the  action  of  a  State  Constitutional 
Convention  the  relief  so  earnestly  desired,  and  so  long  and  per¬ 
sistently  sought,  will  be  secured. 

EFFORTS  TO  ENFORCE  THE  GENERAL  PROPERTV  TAX  BY  A 
UNIFORM  RULE— THE  TAX  INQUISITOR  LAW. 

The  legislature  of  Ohio  has  made  strenuous  efforts  to  enforce  the 
provisions  of  the  Constitution  requiring  that: 

“Laws  shall  be  passed,  taxing  by  a  uniform  rule,  all  real 
and  personal  property  according  to  its  true  value  in  money.” 

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The  owners  of  real  property  have  long  been  deluded  with  the 
erroneous  idea  that  personal  property  can  be  compelled  to  pay  a 
larger  percentage  of  the  total  tax  than  has  been  obtained  from 
that  source  by  enacting  and  enforcing  stringent  tax  laws.  “Real 
property  is  paying  more  than  its  just  share  of  the  total  tax”  is  a 
cry  familiar  to  those  who  have  studied  the  history  of  taxation  in  all 
ages  and  countries. 

All  the  tortures  of  the  inquisition  have  been  resorted  to  at  dif¬ 
ferent  times  and  in  different  countries  in  a  vain  attempt  to  reduce 
taxation  on  real  property  by  compelling  owners  of  personal  property 
to  pay  an  increased  per  cent  of  the  total. 

Such  attempts  have  failed  and  have  been  abandoned  wherever 
tried.  They  have  failed  in  Ohio. 

To  satisfy  the  demand  of  real  property  owners,  the  legislature 
enacted  a  most  stringent  law,  in  1882,  known  as  the  tax  inquisitor 
law,  to  compel  owners  of  personal  property  to  return  the  same  for 
taxation.  At  first  this  law  was  made  applicable  to  certain  counties 
only;  but  afterward  it  was  extended  to  the  whole  state. 

This  law  gave  authority  to  county  commissioners  to  employ 
“tax  inquisitors”  to  search  for  personal  property,  and,  when  dis¬ 
covered,  to  place  the  same  on  the  duplicate,  inflicting  a  penalty  of 
50  per  cent  of  the  tax  due  each  year  for  five  years  next  preceding 
the  discovery  of  the  property.  As  a  reward  for  his  diligence,  the 
“tax  inquistor”  received  20  per  cent  of  -the  tax  collected  on  the  “dis¬ 
covered”  property  and  the  county  auditor  received  4  per  cent  of  the 
tax  collected. 

The  Hon.  James  R.  Garfield,  in  a  paper  read  before  the  National 
Civic  Federation  Conference  on  Taxation,  Buffalo,  May  23-25,  1901, 
characterized  the  “tax  inquisitor  law”  as  follows: 

“The  inquisitor  law  is  an  attempt  to  enforce  a  bad  system 
by  the  infliction  of  severe  penalties.  It  has  proved  not  only 
useless  but  demoralizing.  Demoralizing,  because  it  has  pro¬ 
duced  contempt  for  the  law  and  put  a  premium  upon  dis¬ 
honesty.  The  high  rates  of  taxation  in  most  localities,  re¬ 
sulting  from  a  failure  to  increase  the  valuation,  have  made 
an  honest  return  of  intangible  property  practically  impos¬ 
sible. 

“For  instance,  if  the  tax  rate  be  3  per  cent,  as  it  is  in 
many  places,  the  return  of  money  or  intangible  property  at 
its  market  value,  at  the  present  time,  when  the  average 

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Interest  earnings  are  about  4  per  cent,  would  mean  prac¬ 
tical  confiscation  of  the  earning  power  of  the  property. 
Hence,  estates  which  are  in  the  hands  of  executors  and 
guardians,  and  the  few  individuals  whose  consciences  com¬ 
pel  them  to  obey  the  law,  bear  excessively  unjust  propor¬ 
tions  of  the  burdens  of  taxation. 

“The  amount  of  money  obtained  by  the  inquistor  is  out 
of  all  proportion  to  the  value  of  the  service  rendered. 
Since  the  operation  of  the  law  under  which  they  act,  the 
‘tax  inquisitors’  have  been  paid  over  $1,000,000.00,  making 
this  the  most  lucrative  official  business  in  the  state,  and 
from  which  business  the  state  has  suffered  rather  than 
benefited. 

“The  practical  effect  of  the  law  has  been  to  drive  away 
millions  of  property  which  otherwise  would  have  been  re¬ 
turned  for  at  least  a  partial  valuation. 

“The  experience  of  Ohio  shows  the  utter  uselessness  of 
attempting  to  reach  personal  property  by  individual  re¬ 
turns,  and  the  tax  inquisitor  law,  instead  of  affording  a 
remedy,  has  driven  millions  of  capital  away  from  the  state 
and  has  brought  the  state  into  disrepute.” 

The  “tax  inquisitor  law”  was  in  full  force  in  Ohio  in  1888. 
The  average  tax  rate  for  the  state  for  all  purposes,  state  and  local, 
for  the  year  1887  was  18.9  mills.  This  law  was  declared  unconstitu¬ 
tional  in  1904.  The  average  tax  rate  for  the  state  for  all  purposes, 
state  and  local,  for  the  year  1904  was  25.2  mills. 

For  sixteen  years  Ohio  made  a  strenuous  effort  to  reduce  the 
taxation  of  real  property  by  means  of  an  attempt  to  enforce  the 
most  arbitrary  and  drastic  law  modern  civilization  will  permit  to 
compel  the  listing  of  personal  property  for  taxation  “according  to 
its  true  value  in  money”  to  be  taxed  at  a  uniform  rate  with  real 
property. 

At  the  beginning  of  the  period,  1888,  the  average  tax  rate  for  the 
state  levied  on  real  property  was  18.9  mills.  At  the  close  of  the 
period,  1904,  the  average  tax  rate  for  the  state  levied  on  real 
property  was  25.2  mills,  an  increase  of  33 1-3  per  cent  in  these 
sixteen  years. 

This  experience  should  satisfy  any  intelligent  mind  that  the  tax 
rate  on  real  and  personal  property  cannot  be  reduced  by  inquisi¬ 
torial  and  drastic  methods. 


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^DECENNIAL  APPRAISEMENT  OF  REAL  PROPERTY. 

From  1850  to  1910  Ohio  has  suffered  from  an  archaic  system  of 
decennial  appraisements  of  real  property.  *  As  a  result,  the  state 
and  all  local  taxing  bodies  have  been  compelled  to  provide  for 
growing  needs  by  levying  a  tax  upon  a  real  property  valuation 
from  which  all  growth  of  values  was  excluded  for  ten  years.  This 
made  a  growing  increase  in  the  tax  rate  inevitable.  Every  in¬ 
crease  in  the  tax  rate  offered  an  increased  reward  to  the  successful 
tax  dodger.  The  effect  of  this  has  been  to  force  a  growing  tendency 
to  under-value  real  property  and  to  omit  or  under-value  personal 
property. 

The  injustice  of  the  law  compels  taxpayers  to  attempt  to  secure 
justice  by  evading  the  law. 

In  an  attempt  to  evade  the  law,  personal  property  had  a  decided 
advantage  over  real  property,  since  it  is  far  easier  to  omit  or 
under-value  personal  property  than  it  is  to  omit  or  under-value  real 
property. 

The  logical  and  inevitable  result  of  a  decennial  system  of  real 
property  appraisement  is  to  increase  the  tax  rate.  Every  increase 
in  a  tax  rate  tends  to  increase  the  proportion  of  the  total  tax  paid 
by  real  property. 

The  experience  of  Ohio  for  sixty  years  proves  that  these  con¬ 
clusions  are  true. 

QUADRENNIAL  APPRAISEMENT  OF  REAL  PROPERTY. 

In  1909  Ohio  made  an  effort  to  approach  modern  civilized  taxa¬ 
tion  methods  by  the  enactment  of  a  law  requiring  the  appraisement 
of  real  property  quadrennially  instead  of  decennially.  A  general 
appraisement  of  all  real  property  is  being  made  in  1910.  Under  the 
new  law  another  appraisement  will  be  made  in  1914. 

For  the  purpose  of  the  appraisement  in  1910,  one  assessor  of  real 
property  was  elected  in  November,  1909,  for  each  township,  one 
for  each  village,  and  five  for  each  city,  making  a  total  for  the 
state  of  2,511.  In  Ohio  all  places  having  5,000  or  more  population 
are  classed  as  cities.  There  are  seventy  cities  in  the  state. 

The  law  provided  that  these  assessors  should  begin  their  work 
January  15  and  finish  it  on  or  before  July  1,  1910.  They  are  re¬ 
quired  to  subscribe  to  an  oath  of  office  and  give  bond  in  the  sum 
of  $2,000.  Their  compensation  is  not  less  than  $3.50  per  day  nor 
more  than  $150  per  month.  Provision  is  made  for  the  appointment 
of  assistants. 

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DUTY  OF  ASSESSORS. 

Section  5554.  “The  assessor,  in  all  cases,  from  actual 
view  and  from  the  best  sources  of  information  within  his 
reach,  shall  determine,  as  near  as  practicable,  the  true 
value  of  each  separate  tract  and  lot  of  real  property  in  his 
district,  according  to  the  rules  prescribed  for  valuing  real 
property.  He  shall  note  in  his  plat  book,  separately,  the 
value  of  all  dwelling  houses,  mills,  and  other  buildings, 
which  exceed  $100  in  value.” 

Section  5560/  “Each  parcel  of  real  property  shall  be 
valued  at  its  true  value  in  money,  excluding  the  value  of 
crops  growing  thereon.  The  price  for  which  such  real 
property  would  sell  at  auction,  or  at  forced  sale,  shall  not 
be  taken  as  the  criterion  of  the  true  value.  When  the 
fee  of  the  soil  is  in  one  person,  and  the  right  to  minerals 
therein  in  another  person,  it  shal  be  valued  and  listed  agree¬ 
ably  to  such  ownership  in  separate  entries,  specifying  the 
interests  listed,  and  be  taxed  to  the  parties  owning  the  dif¬ 
ferent  interests,  respectively.” 

PUBLICATION  OF  ASSESSMENTS. 

Section  5546.  “In  cities  the  board  of  real  estate  as¬ 
sessors  shall  cause  to  be  printed  in  pamphlet  form  a  list 
showing  all  the  real  estate  owners  in  each  ward,  together 
with  the  lot  numbers,  street  numbers,  if  any,  feet  frontage 
and  valuation  made  by  them  of  each  parcel  of  real  estate, 
and  cause  a  copy  thereof  to  be  mailed  to  each  owner  of 
real  estate  in  the  ward. 

“In  townships  and  villages  the  county  auditor  shall  cause 
to  be  printed  in  pamphlet  form  a  list  showing  all  the  real 
estate  in  such  township  or  village,  together  with  the  lot 
number,  street  number,  if  any,  township,  range,  survey, 
acreage  and  valuation  made  by  the  assessors,  and  cause  a 
copy  thereof  to  be  mailed  to  each  owner  of  real  estate  in 
each  township  or  village.” 

PENALTY  FOR  MISCONDUCT. 

Section  5567.  “An  assessor  of  his  assistant  who  refuses 
or  knowingly  neglects  to  perform  any  duty  enjoined  on  him 
by  law,  or  consents  to  or  connives  at  any  evasion  of  the 

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provisions  of  this  chapter,  whereby  property  required  to 
be  assessed  is  unlawfully  exempted,  or  the  valuation 
thereof  entered  at  less  than  its  true  value,  for  each  such 
neglect,  refusal,  consent,  or  connivance,  shall  forfeit  and 
pay  to  the  state  not  less  than  two  hundred  dollars  nor  more 
than  one  thousand  dollars,  to  be  recovered  by  action.” 

QUADRENNIAL  COUNTY  BOARDS  OF  EQUALIZATION. 

Section  5594.  “The  auditor,  surveyor  and  commissioners 
(three)  of  each  county  shall  compose  the  county  board  of 
equalization  of  the  real  property  within  the  county,  except 
such  property  as  lies  within  a  city. 

“The  board  shall  convene  the  third  Monday  of  July,  1910, 
and  every  fourth  year  thereafter,  and  shall  close  its  session 
on  or  before  the  first  Monday  in  October  next  following.” 

Section  5595.  “It  shall  complete  its  work  of  equalization 
on  or  before  the  fourth  Monday  of  February,  of  the  year 
next  following  the  beginning  of  the  equalization.” 

Section  5598.  “The  auditor  shall  lay  before  the  board 
the  returns  made  by  the  district  assessors,  with  the  addi¬ 
tions  which  he  shall  have  made  thereto,  and  it  shall  then 
proceed  to  equalize  such  valuations  so  that  each  tract  or 
lot  shall  be  entered  on  the  tax  list  at  its  true  value.” 

COUNTY  BOARDS  OF  REVISION. 

Section  5599.  “The  quadrennial  county  board  of  equaliza¬ 
tion  shall  sit  as  a  board  of  revision,  when  notified  by  the 
auditor  of  the  county  to  meet  for  that  purpose.  It  shall  be¬ 
gin  its  seecion  as  a  board  of  revision  on  the  first  Monday  of 
May  following  the  completion  of  the  quadrennial  equaliza¬ 
tion,  and  shall  close  its  session  on  or  before  the  fourth  Mon- 
of  September  next  following.” 

Section  5601.  “The  board  of  revision  shall  investigate  all 
complaints  against  any  valuation  filed  with  it  as  a  board, 
or  made  by  the  county  auditor,  and  may  increase  or  de¬ 
crease  any  valuations  complained  of,  and  no  others. 

“No  valuation,  as  fixed  by  the  board  of  equalization, 
shall  be  increased  by  the  board  of  revision,  in  any  case, 
except  upon  reasonable  notice  as  prescribed  by  this  chap- 

10 


ter,  to  all  persons  directly  interested  and  an  opportunity 
for  a  full  hearing.  The  auditor  of  the  county  shall  correct 
the  tax  duplicate  according  to  the  deductions  and  additions 
ordered  by  the  board  of  revision,  in  the  manner  provided 
by  law  for  making  corrections  thereof.” 

CITY  BOARDS  OF  REVIEW. 

Section  5618.  “Upon  the  written  application  of  a  county 
auditor  to  the  state  board  of  appraisers  and  assessors  for 
levying  excise  taxes  (auditor  of  state,  treasurer  of  state, 
attorney-general  and  secretary  of  state),  for  the  appoint¬ 
ment  of  a  board  of  review  for  a  municipal  corporation  of 
such  county,  for  the  equalization  of  real  and  personal  prop¬ 
erty,  moneys  and  credits  with  such  municipal  corporation, 
said  state  hoard  may  appoint  such  board  of  review,  to  be 
composed  of  three  citizens,  freeholders  of  such  municipal 
corporation,  not  more  than  two  of  whom  shall  belong  to 
the  same  political  party.” 

Section  5619.  “Term  of  service.  First  hoard,  one  for  one 
year,  one  for  three,  one  for  five  years.  Thereafter,  one  for 
five  years  when  a  term  has  expired.” 

Section  5620.  “Board  meet  annually  first  Monday  in 
June.  May  continue  in  session  one  year,  but  the  appoint¬ 
ing  board  may  fix  time  within  which  the  work  shall  be 
completed.” 

Section  5621.  “The  county  commissioners  shall  fix  the 
salary  of  the  members  of  the  board  of  review,  which  shall 
not  be  less  than  $3.50  per  day  and  not  exceed  $250  per 
month  for  the  time  such  hoard  is  in  session. 

“No  member  thereof  shall  be  engaged  in  any  other  busi¬ 
ness  or  employment  during  the  period  of  time  covered  by 
the  session  of  the  board.” 

Section  5624.  “Boards  of  review,  within  and  for  their 
respective  municipalities,  shall  have  all  the  powers  and 
perform  all  the  duties  provided  by  law  for  all  boards  of 
equalization  and  review.  They  may  hear  complaints  and 
equalize  the  valuations  of  real  and  personal  property, 
moneys  and  credits  within  their  respective  municipali¬ 
ties.” 


11 


POWERS  AND  DUTIES  OF  THE  STATE  TAX  COMMISSION 
OF  OHIO. 


The  State  Tax  Commission  of  Ohio  was  created  by  act  of  the 
legislature  May  10,  1910.  It  is  composed  of  three  members,  not 
more  than  two  of  which  shall  belong  to  the  same  political  party. 
Their  salary  is  $5,000  per  year.  They  are  required  to  devote  their 
entire  time  to  the  work  of  the  Commission.  Their  powers  and 
duties  for  the  administration  of  all  laws  for  the  asessment  of  taxes 
are  broad  and  mandatory.  For  the  assessment  of  real  and  personal 
property,  their  powers  and  duties  are  set  forth  in  the  following 
sections  of  the  act  of  May  10,  1910: 

“Section  81.  The  Commission  shall  prepare  and  transmit 
to  the  auditors  of  the  several  counties,  such  forms  of  re¬ 
turns  to  be  made  by  them  to  its  office,  and  such  instruc¬ 
tions  as  it  deems  conducive  to  the  best  interests  of  the 
state  upon  a  subject  affecting  taxation,  or  the  construction 
of  any  statute  affecting  taxation  the  execution  of  which 
devolves  upon  any  county  or  local  officer.  It  shall  see  that 
all  laws  concerning  the  valuation  and  assessment  of  all 
classes  of  property,  and  the  collection  of  taxes  thereon  are 
faithfully  obeyed.  It  shall  issue  such  orders  and  instruc¬ 
tions  to  the  different  taxing  officers  as  will  carry  into  ef¬ 
fect  the  provisions  of  law  relating  to  taxation  and  shall  en¬ 
force  the  same  agreeably  to  the  provisions  of  this  act. 
Each  such  officer  shall  obey  and  observe  all  such  orders 
and  instructions,  and  upon  failure  shall  be  subject  to  the 
penalties  herein  provided. 

“It  shall  order  a  reassessment  of  the  real  or  personal 
property  in  any  taxing  district,  when  in  the  judgment  of 
said  commission  such  property  has  not  been  assessed  at 
its  true  value  in  money,  to  the  end  that  all  classes  of 
property  in  such  taxing  district  shall  be  assessed  in  com¬ 
pliance  with  the  law.  When  a  reassessment  is  ordered  in 
any  taxing  district  the  commission  shall  appoint  an  ap¬ 
praiser  or  board  of  appraisers  who  shall  forthwith  pro¬ 
ceed  to  reassess  such  property  in  such  taxing  district  and 
who  shall  have  all  the  powers,  shall  perform  all  the 
duties  and  shall  receive  the  same  compensation  from  the 
same  sources  as  provided  by  law  for  the  assessors  of  real 
or  personal  property  as  the  case  may  be.  It  shall  require 

12 


county  auditors  to  place  upon  the  tax  duplicate  any  prop¬ 
erty  which  may  be  found  to  have,  for  any  reason,  escaped 
assessment  and  taxation. 

“It  may  raise  or  lower  the  assessed  value  of  any  real 
or  personal  property,  first  giving  notice  to  the  owner  or 
owners  thereof  fixing  a  time  and  place  for  hearing  any 
person  or  persons  interested  to  the  end  that  the  assess¬ 
ment  laws  of  the  state  may  be  equitably  administered. 
Said  hearing  shall  in  case  of  realty  be  had  within  the 
county  in  which  said  realty  is  situated,  and  in  case  of 
personalty  within  the  county  wherein  the  owner  thereof 
resides  if  a  natural  person  residing  in  this  state. 

“For  the  purpose  of  protecting  the  public  interest  the 
Commission  is  authorized  to  appear  and  upon  its  applica¬ 
tion  entitled  to  be  heard  in  any  court  or  tribunal  in  any 
proceeding  in  which  an  abatement  of  taxes  is  sought.  It 
shall  be  the  duty  of  the  clerk  of  any  court  of  record  in  this 
state  to  immediately  transmit  to  the  Commission  by  regis¬ 
tered  letter  a  copy  of  the  petition  filed  in  any  action  in 
which  an  abatement  of  taxes,  assessed  by  the  Commission, 
is  sought,  and  charge  the  fee  therefor  in  the  costs. 

“County  auditors  and  all  local  officers  shall  observe  and 
use  such  forms  and  obey  such  instructions.’’ 

PENALTIES— ACT  OF  MAY  19,  1910. 

“Section  111.  Whoever  violates  any  provision  of  this 
act,  or  neglects  or  refuses  to  perform  any  duty  herein  re¬ 
quired,  for  which  a  penalty  has  not  otherwise  been  pro¬ 
vided,  or  neglects  or  refuses  to  olbey  any  lawful  require¬ 
ment  or  order  made  by  the  Commission,  for  every  such 
violation,  failure  or  refusal  shall  be  fined  not  less  than 
twenty-five  dollars  nor  more  than  one  thousand  dollars 
for  each  offense.  In  construing  and  enforcing  the  provis¬ 
ions  of  this  section,  the  act,  omission  or  failure  of  any 
officer,  agent  or  other  person  acting  for  or  employed  by  any 
public  utility,  company,  corporation  or  association  acting 
within  the  scope  of  his  employment  shall  in  every  case  be 
deemed  to  be  the  act,  omission  or  failure  of  such  public 
utility,  company,  corporation  or  association.” 


13 


“Section  112.  Whoever,  being  a  member  of  the  Commis¬ 
sion,  or  an  assessor  or  a  member  of  a  county  board  of 
equalization,  or  a  person  whose  duty  it  is  to  list,  value, 
assess  or  equalize  real  or  personal  property  for  taxation, 
shall  knowingly  or  wilfully  fail  to  list  or  return  for  assess¬ 
ment  or  valuation  any  real  estate  or  personal  property,  or 
knowingly  or  wilfully  lists  or  returns  for  assessment  or 
valuation  any  real  or  personal  property  at  and  other  than 
its  true  value  in  money,  or  shall  wilfully  or  knowingly  fail  to 
equalize  any  real  or  personal  property  according  to  its  true 
value  in  money,  shall  be  fined  not  less  than  fifty  dollars 
nor  more  than  five  hundred  dollars,  and  in  addition  thereto, 
if  he  be  an  officer,  shall  forfeit  his  office  or  position.” 

FULL  VALUATION:  NO  INCREASE  IN  TAXATION. 

Taught  by  the  example  of  West  Virginia,  the  State  of  Ohio  has 
commenced  the  work  of  placing  all  property  on  the  tax  list  at  its 
true  value  in  money. 

To  protect  taxpayers  for  an  increase  in  taxation,  induced  by  a 
large  increase  in  the  taxable  value  of  property  listed  for  taxation, 
the  legislature  at  its  session  in  1910  enacted  a  tax  limit  law  in¬ 
tended  to  safeguard  taxpayers  against  increased  taxation. 

Section  3  of  this  law  provides,  in  substance,  as  follows: 

“The  maximum  rate  of  taxation  in  any  taxing  district  for 
any  purpose,  as  now  fixed,  shall  be  and  is  hereby  changed 
so  that  such  maximum  rate,  as  levied  on  the  total  valuation 
of  all  taxable  property  in  the  taxing  district  in  each  of  the 
years  1:911  and  1912  and  any  year  thereafter  would  produce 
no  greater  amount  of  taxes  than  the  present  maximum  rate 
for  such  purpose,  if  levied  on  the  total  valuation  of  all  tax¬ 
able  property  therein  for  the  year  1910  would  produce,  plus 
the  additions  provided  for  in  Section  2,  which  are  ‘an 
amount  equal  to  the  aggregate  amount  of  taxes  levied  in 
in  such  district  for  the  year  1909  plus  6  per  cent  thereof 
for  the  year  1911,  9  per  cent  for  the  year  1912,  and  12  per 
cent  thereof  for  any  year  thereafter.*  Any  minimum  rate 
required  by  law  to  be  levied  for  any  purpose,  is  hereby 
reduced  in  like  proportion  that  the  maximum  rate  is  herein 
reduced.  The  intent  and  purpose  of  this  act  is  to  provide 
that  an  increase  in  the  total  valuation  of  all  taxable  prop- 

14 


erty  in  the  several  taxing  districts  shall  not  increase  the 
total  amount  of  the  taxes  now  levied  therein,  excepting  to 
the  amount  of  the  additions  herein  provided  for.” 

Here  is  a  positive  safeguard  provided  to  protect  taxpayers 
against  over-taxation  during  the  four  years’  period  for  which  values 
are  established  by  the  quadrennial  appraisement. 

Public  sentiment  aroused  to  make  it  certain  that  there  shall  be 
no  tax  evasion  by  under-valuation  will  inevitably  demand  that  there 
shall  be  no  over-taxation. 

This  tax  limit  law,  as  shown,  provides  a  mathematical  rule  by 
which  the  amount  that  should  be  raised  by  taxation  in  any  district 
can  be  definitely  and  easily  determined.  This  renders  groundless 
all  fear  of  over-taxation,  provided  the  people  intelligently  and  ef¬ 
fectively  perform  their  moral  and  civic  duty  by  creating  a  public 
sentiment  strong  enough  and  sufficiently  well  directed  to  make  the 
enforcement  of  the  law  a  certainty. 

SENTIMENT  IN  FAVOR  OF  FULL  VALUATION  AND  A  LOW 

TAX  RATE. 

The  constitutional  provision  requiring  the  taxation  of  all  prop¬ 
erty  by  a  uniform  rule  at  its  true  value  in  money  has  never  been 
obeyed  in  Ohio.  There  is  no  evidence  that  a  proper  effort  has 
even  been  made  to  enforce  the  law.  Ohio  is  now  reaping  the 
natural  fruit  of  permitted  disobedience  of  law. 

Unpunished  law  breaking  in  one  direction  inevitably  breeds  dis¬ 
respect  for  law  in  all  directions.  Recent  events  in  Ohio,  disclosing 
the  true  attitude  of  many  people  toward  their  laws,  are  showing  a 
degree  of  degeneracy  that  is  appalling.  Instead  of  enjoying  the 
blessings  and  stability  of  a  government  by  law,  we  have  a  govern¬ 
ment  by  passion,  prejudice  and  ignorance  that  is  fast  developing  a 
condition  of  anarchy.  Our  form  of  government  cannot  endure  un¬ 
less  it  is  supported  by  loyal  obedience  to  law  on  the  part  of  its 
citizens.  To  prevent  our  form  of  government  from  perishing  it  is 
absolutely  necessary  that  a  public  sentiment  be  created  and  main¬ 
tained  that  will,  with  righteous  indignation,  brand  every  law¬ 
breaker  as  a  traitor  to  his  country  more  dangerous  to  the  preser¬ 
vation  and  perpetuation  of  its  institutions  than  those  who  openly 
assail  its  authority  and  flag  by  force  of  arms. 

There  are  two  things  which  must  be  .done  by  those  who  believe 
in  “a  government  of  the  people,  by  *the  people,  for  the  people.” 

15 


They  must  see  to  it  that  their  laws  are  just,  and  that  they  are 
obeyed.  If  they  fail  to  do  these  two  things  intelligently  and  ef¬ 
fectively,  they  must  prepare  themselves  for  a  reign  of  anarchy,  to 
be  followed  by  a  dictatorship. 

During  the  year  1909  I  made  many  addresses  and  used  every 
instrumentality  at  my  command  in  an  effort  to  create  a  state  wide 
public  sentiment  that  can  be  depended  upon  to  sustain  public  offi¬ 
cials  in  their  efforts  to  enforce  the  law.  Some  fruit  of  this  work  is 
seen  in  the  laws  enacted  by  the  Legislature  in  1910  and  in  the  plat¬ 
forms  of  the  Democratic  and  Republican  parties  adopted  in  June 
and  July  of  this  year. 

The  Democratic  platform  declares: 

"We  favor  a  maximum  aggregate  tax  rate  of  10  mills, 
without  any  right  to  increase  it  except  by  a  vote  of  the 
people.” 

The  Republican  platform  declares: 

"We  favor  assessing  all  property,  real  and  personal,  at  its 
true  value  in  money  and  limiting  the  tax  rate  for  all  pur¬ 
poses  to  10  mills.” 

In  my  opinion,  when  all  property  is  listed  for  taxation  in  1911  at 
its  true  value  in  money,  and  the  amount  to  be  collected  by  taxation 
is  limited  in  each  taxing  district  to  the  amount  collected  in  such 
district  in  1909  plus  6  per  cent,  the  tax  rate  in  1911  for  all  purposes 
will  not  be  more  than  7.5  mills  in  a  majority  of  all  the  taxing  dis¬ 
tricts  in  the  state. 

Such  a  consummation  will  be  a  landmark  in  the  progressive  de¬ 
velopment  of  Ohio. 

PUBLIC  OFFICIALS  MUST  BE  SUSTAINED  BY  AN  INTELLI¬ 
GENT  PUBLIC  SENTIMENT. 

For  the  first  time  in  its  history,  the  State  of  Ohio  has  a  State  Tax 
Commission  endowed  with  ample  power  to  enforce  its  taxation  laws. 
Back  of  the  State  Commission  are  county  and  city  boards  of  equali¬ 
zation,  revision  and  review.  These  officials,  intelligent,  energetic 
and  determined  as  they  undoubtedly  are,  cannot  enforce  the  laws 
unless  supported  by  a  clearly  expressed  public  opinion.  When  citi¬ 
zens  are  willing  to  obey  the  law  its  enforcement  is  easy. 

A  deep  seated,  long  established  evil,  by  means  of  which  those 
who  practice  it  secure  substantial  tangible  reward  of  cash  in 

16 


pocket;  an  evil  that  feeds  greed  at  the  expense  of  morality  and 
civic  duty,  as  does  the  evil  of  tax  evasion  by  under  valuation,  can¬ 
not  be  uprooted  by  an  act  of  the  General  Assembly.  The  General 
Assembly  has  performed  its  full  duty  by  providing  the  means  by 
which  this  evil  can  be  eradicated.  If  now  the  people  fail  to  per¬ 
form  their  duty,  their  lack  of  moral  and  civic  stamina  will  be 
responsible  for  the  failure  now  to  secure  all  the  benefits  which 
recently  enacted  improvements  in  Ohio  tax  laws  have  made  pos¬ 
sible. 

Efforts  are  being  made  in  various  directions,  inspired  by  many 
reasons,  to  create  a  vigorous  public  sentiment  to  sustain  a  demand 
for  “law  enforcement.”  No  law  has  greater  need  to  be  sustained 
by  such  a  sentiment;  no  law,  intelligently  and  completely  enforced 
throughout  the  state,  has  greater  power  to  benefit  the  people  by 
securing  for  them  diversified,  widely  disseminated  and  enduring 
economic  advantages  than  has  the  law  now  on  the  statute  books 
governing  the  assessment  of  real  and  personal  property  for  taxa¬ 
tion. 

Intelligent  public  sentiment  cannot  be  created  and  maintained  on 
this  subject  without  the  creation  of  voluntary  organizations  through 
which  all  taxpayers  can  co-operate.  For  this  reason  I  have  recom¬ 
mended  the  taxpayers  in  each  taxing  district  in  the  state  to  organ¬ 
ize  an  efficient  committee  through  which  they  can  co-operate  with 
the  taxing  officials  of  their  district,  and  with  each  other,  to  secure 
an  intelligent  enforcement  of  the  tax  laws  of  the  state.  This  is  the 
only  way  in  which  the  vicious  system  of  tax  evasion,  which  has 
been  permitted  to  exist  since  the  adoption  of  the  present  state  con¬ 
stitution  in  1851,  can  be  broken  up.  Every  one  knows  this  system 
is  vicious,  but  no  one  can  break  it  up  single  handed.  This  cannot 
be  accomplished  by  the  officials  and  taxpayers  in  a  single  district 
or  county.  It  can  be  accomplished  only  by  a  state-wide  movement 
that  will  reach  and  organize  the  taxpayers  in  every  taxing  district 
in  the  state. 

CORRECTION  OF  ORIGINAL  ASSESSMENTS  THE  ONLY 
EQUALIZATION  REQUIRED.  • 

A  fundamental  mistake  will  be  made  if  any  city  or  county  board, 
or  if  the  state  board  of  equalization,  now  designated  by  law  as 
“The  Tax  Commission  of  Ohio”,  shall  undertake  to  equalize  values 
by  any  procedure  other  than  that  of  correcting  all  original  assess- 

17 


ments  so  as  to  make  it  certain  that  each  piece  of  property  listed 
for  taxation  is  placed  on  -the  tax  list  at  its  true  value.  This  is  the 
only  method  of  equlization  approved  by  those  who  promoted  the 
enactment  of  the  quadrennial  appraisement  law  of  1909.  It  is  the 
only  method  of  equalization  approved  by  those  who  promoted  the 
enactment  of  the  tax  limiting  law,  and  the  state  tax  commission 
law,  of  1910.  It  is  the  only  method  of  equalization  that  can  destroy 
the  evil  of  tax  evasion  through  undervaluation.  It  is  the  only 
method  of  equalization  that  can  remove  all  inequalities  between 
taxpayers;  that  can  stop  rewarding  dishonest,  and  penalizing  hon¬ 
est,  tax  assessments. 

It  is  obvious  tthat,  when  each  piece  of  property  is  entered  on  the 
tax  list  at  its  true  value  in  money,  all  inequalities  between  tax¬ 
payers  will  be  obliterated;  that  all  tax  evasion  by  undervaluation 
will  be  wiped  out;  that  the  values  of  all  property  will  be  equalized; 
that  no  further  equalization  work  can  be  required. 

THE  HORIZONTAL  METHOD  OF  EQUALIZATION 
CONDEMNED. 

All  inequalities  in  valuations  between  the  counties  of  the  state, 
and  between  townships,  villages  and  cities  within  counties,  exist, 
primarily,  in  inequalities  in  the  original  assessments  as  between 
taxpayers.  The  requirements  of  justice  demand  that  such  inequali¬ 
ties  shall  be  removed  by  the  correction  of  the  original  assessments, 
not  confirmed  by  the  horizontal  method  of  equalization  between 
taxing  districts. 

The  method  of  equalizing  values  between  the  counties  of  the 
state,  and  between  townships,  villages  and  cities  within  counties, 
by  adding  or  deducting  a  certain  per  cent  of  the  total,  applicable 
to  all  valuations  alike,  does  not  remove  inequalities — it  confirms 
all  inequalities  existing  between  taxpayers.  Instead  of  destroying 
the  evil  of  undervaluation,  the  horizontal  method  of  equalization 
protects  all  undervaluations  and  makes  certain  the  rewards  sought 
by  those  who  seek  to  evade  the  payment  of  a  part  of  the  tax  justly 
due  from  them.  The  evil  of  undervaluations  cannot  be  destroyed 
until  the  horizontal  method  of  equalization  is  abandoned. 

ANNUAL  ASSESSMENTS  NECESSARY  FOR  ECONOMICAL  AND 
ACCURATE  WORK. 

One  of  the  worst  effects  of  the  system  of  decennial  appraisements 
from  which  Ohio  has  suffered  is  found  in  the  fact  that  such  a  sys- 

18 


tem  destroys  all  possibility  of  securing  the  services  of  experienced 
men  to  do  the  work.  Not  only  this,  it  makes  it  impossible  to  keep 
the  records  of  one  appraisement  in  proper  form  to  be  of  service 
in  making  the  next  appraisement. 

On  account  of  these  conditions,  those  who  are  now  attempting  to 
appraise  all  real  property  in  Ohio  at  its  true  value  in  money  have 
not  only  to  contend  with  the  custom  of  undervaluation,  confirmed 
by  sixty  years  practice,  but  they  have  to  contend  with  the  want  of 
correct  records,  rules  and  instructions  tested  by  use,  and  their  own 
lack  of  experience. 

Work  done  under  these  conditions  must  necessarily  be  imper¬ 
fectly  done  and  thus  render  the  imposition  of  an  added  expense 
necessary  to  correct  errors  and  produce  equitable  results  for  tax¬ 
payers. 

No  amount  of  good  intentions  and  diligent  work  on  the  part  of 
an  assessor  can  render  his  service  economical  and  satisfactory 
unless  he  has  the  necessary  ability  to  do  his  work  well,  which  can 
be  acquired  only  by  study  and  experience.  It  is  not  possible  to 
select  a  body  of  assessors,  by  election,  out  of  the  general  citizen¬ 
ship,  to  be  employed  for  six  months  once  in  ten  years,  or  once  in 
four  years,  who  will  be  as  capable  of  doing  their  work  correctly 
and  as  economically  as  will  assessors,  originally  appointed  with 
reference  to  their  fitness  for  service,  under  a  system  that  will 
keep  them  continuously  employed. 

It  is  hoped  that  the  people  of  Ohio  will  be  sufficiently  instructed 
by  the  experience  they  will  gain  from  the  appraisement  now  being 
made  to  induce  them  to  adopt  annual  appraisements  in  place  of 
quadrennial  appraisements,  and  the  permanent  employment  of  ap¬ 
pointed  assessors  in  place  of  elected  assessors  to  serve  for  six 
months  once  in  four  years. 

Annual  appraisements  and  permanent  employment  is  the  only 
system  under  which  the  work  of  appraising  real  and  personal  prop¬ 
erty  can  be  economically  and  accurately  done.  This  is  the  only 
system  under  which  it  is  possible  to  enforce  tax  laws  and  establish 
justice  in  taxation. 

A  NOTABLE  OCCASION:  EIGHTEEN  HUNDRED  NEWLY 
ELECTED  ASSESSORS  OF  REAL  PROPERTY  IN 
CONFERENCE. 

At  the  election  held  in  November,  1909,  the  people  of  Ohio 
elected  one  assessor  of  real  property  for  each  township,  one  for 

19 


each  village  and  five  for  each  city,  making  a  total  of  2511  for  the 
state,  to  begin  their  work  on  January  15’,  1910. 

Immediately  after  election,  the  auditor  of  state  began  to  receive 
appeals  from  these  newly  elected  assessors  for  instructions  as  to 
how  their  work  was  to  be  done.  Soon  there  was  a  flood  of  such 
appeals  emanating  from  every  section  of  the  state. 

As  a  scientific  appraisal  of  real  property  had  never  been  made 
in  Ohio,  and  as  the  work  done  for  the  decennial  appraisement  of 
1900  was  done  in  a  way  to  be  utterly  valueless  as  a  guide  for  the 
work  to  be  done  in  1910,  the  auditor  of  state  found  himself  unable 
to  satisfy  the  demands  made  upon  him. 

To  meet  this  emergency,  he  called  a  state  conference  of  all 
elected  assessors  of  real  property  to  be  held  in  Columbus,  Decem¬ 
ber  15,  1909. 

This  conference  was  attended  by  abou,t  1800  assessors,  all  eager 
to  learn  how  to  do  their  work  correctly.  They  were  addressed  by 
Governor  Judson  Harmon  and  Auditor  of  State  E.  M.  Fullington, 
who  warmly  advocated  the  policy  of  full  valuations  and  reduced 
tax  rates. 

Desiring  to  obtain,  for  the  service  of  the  state,  the  best  instruc¬ 
tion  that  could  be  given  to  these  assessors  in  an  off  hand  discus¬ 
sion  of  their  problems,  and  answers  to  their  questions,  as  president 
of  the  Ohio  State  Board  of  Commerce,  I  appealed  to  Mr.  Lawson 
Purdy,  president  of  the  Department  of  Taxes  and  Assessments  of 
New  York  City,  and  Mr.  A.  C.  Pleydell,  secretary  of  the  New  York 
Tax  Reform  Association,  to  attend  and  address  this  conference  for 
the  purpose  of  giving  these  assessors,  so  far  as  it  could  be  done  in 
such  manner,  the  benefit  of  their  studies,  observations  and  expe¬ 
rience.  As  it  was  impossible  for  Mr.  Purdy  to  respond  to  this  call 
for  help,  he  delegated  Mr.  George  J.  Craigen,  assistant  chief  of  the 
real  estate  bureau  in  his  department,  to  attend  the  conference  and 
give  the  assembled  assessors  the  benefit  of  his  fifteen  years  con¬ 
tinuous  service  in  the  work  of  appraising  real  property  in  New 
York  City.  Mr.  A.  C.  Pleydell  accepted  the  invitation. 

No  speakers  ever  had  a  more  intensely  interested  audience  than 
they  had  on  this  occasion.  The  afternoon  session,  1500  assessors 
present,  was  addresed  by  Mr.  Pleydell.  A  division  was  made  for 
the  evening  session;  township  and  village  assessors  were  requested 
to  meet  in  one  hall  to  be  addressed  by  Mr.  Pleydell,  city  assessors 
were  requested  to  meet  in  another  hall  to  be  addressed  by  Mr. 
Craigen.  20 


The  interest  at  these  meetings  was  so  intense  an  announcement 
was  made  that,  although  the  conference  was  called  for  but  one  day, 
an  overflow  meeting  would  be  held  the  next  forenoon  in  the  assem¬ 
bly  rooms  of  the  Columbus  Chamber  of  Commerce  and  would  be 
addressed  by  Mr.  Craigen  and  Mr.  Pleydell.  As  many  assessors 
attended  this  meeting  as  could  find  standing  space  in  the  audience 
room. 

RULES  AND  SUGGESTIONS  FOR  THE  ASSESSMENT  OF  REAL 

PROPERTY. 

During  their  addresses,  and  in  answering  questions,  Mr.  Craigen 
and  Mr.  Pleydell  made  frequent  reference  to  certain  tables,  rules 
and  suggestions  that  were  in  daily  practical  use  for  the  assessment 
of  real  property  by  assessors  employed  in  New  York  City  and  in 
New  Jersey.  Repeated  and  urgent  requests  came  from  numerous 
assessors  for  a  copy  of  these  tables,  rules  and  suggestions,  which 
are  the  product  of  years  of  practical  experience. 

To  satisfy  this  demand,  I  announced  that  the  Ohio  State  Board  of 
Commerce  would  arrange  to  have  these  tables,  rules  and  sugges¬ 
tions  printed  and  would  supply  a  copy  of  the  same  to  all  tax 
officials  and  assessors  in  the  state  free  of  charge. 

Mr.  Lawson  Purdy,  Mr.  George  J.  Craigen  and  Mr.  A.  C.  Pleydell 
kindly  collaborated  in  the  preparation  of  a  thirty  paged  booklet, 
which  was  printed  in  New  York  under  their  supervision,  containing 
the  tables,  rules  and  suggestions  desired.  This  booklet  was  sup¬ 
plied  to  all  tax  officials  and  assessors  in  Ohio,  by  the  Ohio  State 
Board  of  Commerce,  as  announced.  Its  value  was  quickly  recog¬ 
nized.  Copies  were  sought  by  real  estate  men  and  taxing  officials 
in  other  states.  That  it  has  been  the  means  of  rendering  a  needed 
and  valuable  service  is  attested  by  many  letters  received  from 
assessors  after  their  term  of  service  had  expired,  but  one  of  which 
can  be  given  space  here.  It  is  as  follows: 

“Lima,  Ohio,  July  18,  1910. 

“Ohio  State  Board  of  Commerce,  Columbus,  Ohio. 

“Gentlemen:  As  a  quadrennial  appraiser  of  real  prop¬ 
erty  for  the  city  of  Lima,  Ohio,  1910,  please  permit  me  to 
extend  to  you  my  sincere  thanks,  and  express  my  hearty 
appreciation  for  the  services  rendered  me  by  your  book  of 
‘Rules  and  Suggestions’  in  computing  the  value  of  lands  In 
parcels  or  broken  lots. 


21 


“When  the  price  per  foot  front  of  a  standard  depth  lot 
has  been  established,  then  your  percentage  tables  become 
invaluable;  and  I  can  see  no  better  way  to  do  justice  to  the 
property  owners  of  the  same  taxing  district  than  that  of 
your  system. 

“Feeling  that  a  general  use  of  your  plans  would  be 
largely  conducive  to  equity  in  taxation,  I  am, 

“David  M.  Fisher.” 

RECOMMENDATION:  A  COMMITTEE  TO  COMPILE  A  BOOK 
OF  TABLES,  RULES  AND  DIRECTIONS  FOR  THE 
ASSESSMENT  OF  REAL  PROPERTY. 

Guided  by  this  experience,  I  believe  the  International  Tax  Asso¬ 
ciation  can  render  a  service  of  great  practical  value  by  creating  a 
committee  under  whose  auspices,  in  co-operation  with  the  city, 
county  and  state  tax  officials  of  every  state  and  province  and  with 
real  estate  men  generally,  a  book  of  tables,  rules  and  directions  for 
the  assessment  of  real  property  can  be  compiled  and  published,  to 
be  supplied  at  cost  of  publication  to  the  taxing  officials  of  every 
state  and  province  desiring  the  same. 

The  official  adoption  by  any  state  of  tables,  rules  and  directions 
so  formulated  will  render  the  work  of  assessing  real  property  uni¬ 
form,  equitable  and  economical  throughout  the  state,  and  similar 
action  by  all  states  will  result  in  a  body  of  comparable  statistics  of 
real  property  values  that  will  be  of  the  highest  value  to  property 
owners  and  taxpayers,  taxing  officials  and  state  legislatures. 

Comparable  statistics,  scientifically  developed,  will  result  in  uni¬ 
formity  in  tax  laws  and  administrative  procedure.  In  its  report,  to 
be  submitted  to  this  conference,  the  Committee  on  Uniform  Classi¬ 
fication  of  Real  Estate  well  says: 

“Without  a  proper  statistical  basis,  true  comparison  be¬ 
tween  states  and  localities  is  impossible,  and  withouF  true 
comparison  the  determination  of  the  real  economic  effects 
of  tax  laws  and  their  administration  is  impossible.” 

AN  ASTOUNDING  PROPOSITION:  EXPLOITATION  OF  TAX 
ASSESSMENT  WORK  BY  A  PRIVATE  CORPORA¬ 
TION  FOR  PROFIT. 

I  have  never  known  a  person  engaged  in  tax  reform  work  who 
had  a  self-seeking  commercial  purpose.  It  is  difficult  to  correctly 
express  the  surprise  and  indignation  felt  by  myself  and  others 

22 


when  men  appeared  at  the  State  Conference  of  Real  Property 
Assessors,  distributing  circulars  announcing  that  a  private  corpora¬ 
tion  organized  for  profit  proposed  to  contract  with  city  boards  of 
real  property  appraisers  to  do  the  work  of  determining  the  value 
for  taxation  of  all  real  property  in  their  respective  cities. 

This  was  a  bald  proposition  to  the  boards  of  assessors  to  permit 
a  private  corporation  to  exploit  for  gain  the  work  they  were  elected 
to  perform  with  the  aid  of  individually  employed  assistants. 

I  at  once  denounced  this  proposal  in  the  public  press,  informing 
the  assembled  assessors  and  the  public  that  all  assessors  in  Ohio 
would  be  furnished,  without  charge,  with  the  tables  and  rules  in  use 
in  New  York  City  for  determining  the  value  of  real  property,  ac¬ 
knowledged  to  be  the  best  in  use  by  any  tax  assessing  officials  in 
this  country.  This  was  done  by  supplying  the  booklet  to  which 
reference  has  been  made. 

In  a  “letter  of  transmittal”,  published  in  this  booklet,  Mr.  Lawson 
Purdy,  president  of  the  Department  of  Taxes  and  Assessments, 
New  York  City,  says: 

“These  tables  cover  the  rules  that  are  commonly  used  by 
the  deputies  to  assist  them  in  determining  and  checking 
the  relative  values  of  different  parcels  of  property.  They 
will  be  of  material  assistance  to  any  assessor.  But  they 
cannot  take  the  place  of  personal  inspection  nor  do  they 
remove  the  necessity  for  the  exercise  of  careful  judgment. 

“This  department  is  always  glad  to  be  of  service  to  tax 
officials  in  any  state,  and  if  the  assessors  from  your  state 
should  visit  this  department,  they  will  receive  a  cordial 
welcome  and  will  be  afforded  all  possible  assistance.” 

This  private  corporation  has  made  but  one  contract  in  Ohio.  It 
is,  however,  apparently  canvassing  the  whole  country  soliciting 
from  city  authorities  contracts  to  perform  tax  assessment  work 
upon  terms  which,  if  entered  into,  will  constitute  a  public  scandal. 

To  illustrate:  The  contract  attempted  to  be  negotiated  by  this 
private  corporation  with  the  taxing  authorities  of  the  city  of  Phila¬ 
delphia  calls  for  payment  to  be  made  by  the  city  at  the  rate  of 
$1.70  for  each  parcel  of  land  and  $1.70  in  addition  for  the  buildings 
erected  on  the  land,  the  taxable  value  of  which  is  determined  by 
the  .appraising  corporation. 

The  following  is  taken  from  the  Philaelphia  Record  for  July  22, 
1910: 


23 


“There  seems  to  be  no  limit  to  the  cost  of  the  proposed 
revision  of  the  real  estate  assessments  as  indicated  in  coun¬ 
cil  yesterday.  The  finance  committee  approved  a  bill  that 
will  give  the  committee  $85,000  out  of  which  the  appraisal 
company  will  receive  about  $70,000  for  revising  the  ap¬ 
praised  value  of  seven  wards. 

“The  company  has  fixed  a  rate  of  $1.70  per  parcel,  and 
where  a  lot  is  also  occupied  by  a  building,  the  whole  is  con¬ 
sidered  as  two  parcels  and  the  cost  for  appraising  would 
be  $3.40.  It  is  estimated  that  at  this  rate,  or  the  price  of 
$70,000  quoted  for  the  seven  wards  for  which  the  appraisal 
company  is  to  get  a  contract,  it  will  cost  $350,000  additional 
for  the  other  forty  wards.” 

The  Philadelphia  Record  says  editorially  in  the  same  issue: 

“Philadelphia  has  seventy  real  estate  assessors  at  an 
annual  salary  of  $4000  each.  The  Board  of  Revision  of 
Taxes  and  its  staff  costs  $60,240  more  each  year  in  salaries 
alone — a  total  of  $340,240.  If  we  are  going  to  let  out  the 
work  of  assessing  property  values  in  this  city  we  had  bet¬ 
ter  do  away  with  the  officials  who  are  paid  to  make  the 
assessments  and  save  this  third  of  a  million  that  seems  to 
be  a  duplicate  expense.” 

I  am  not  informed  as  to  whether  this  corporation  has  a  fixed 
price  and  is  offering  its  services  to  all  cities  on  identical  terms, 
or  whether  it  fixes  its  price  according  to  the  wealth  or  gullibility 
of  its  victims.  The  one  contract  it  has  made  in  Ohio  was  made 
with  the  board  of  real  property  assessors  for  the  city  of  Columbus 
for  a  lump  sum  of  $7000  to  cover  the  work  for  the  entire  city. 
This  price  is  enormously  less  than  it  would  be  at  the  rate  of  $1.70 
for  each  parcel  of  land  and  $1.70  in  addition  for  each  structure  on 
the  land  appraised.  There  are  in  the  city  of  Columbus  65,000  lots 
and  34,000  buildings,  making  a  total  of  99,000  parcels.  At  the 
price  charged  Philadelphia  by  this  private  corporation,  $1.70  per 
parcel,  the  cost  to  the  city  of  Columbus  would  have  been  $168,000. 
The  contract  was  made  by  Columbus  for  only  $7000.  Poor  gullible 
Philadelphia! ! ! 

How  the  taxing  authorities  of  any  city  can  justify  themselves 
for  making  a  contract  similar  to  the  one  proposed  to  be  made  with 
the  city  of  Philadelphia  is  beyond  my  ability  to  understand. 

24 


Mr.  A.  C.  Pleydell  makes  the  following  statement  in  a  letter 
published  in  the  Philadelphia  Record  for  July  30,  1910: 

“Tables  compiled  by  the  New  York  City  Tax  Department 
and  published  in  its  report  for  1907  show,  for  the  large 
cities  of  the  country,  the  following  cost  per  parcel  of  as¬ 


sessing  property: 

New  York  . $  88 

Boston  .  2  00 

St.  Louis  .  45 

Detroit  .  34 

Baltimore  .  29 

Milwaukee  .  31 

Philadelphia  .  53 

Newark  .  1  10 

Pittsburg  .  85 


“These  figures  include  the  total  cost  of  the  departments, 
which,  in  every  instance,  have  other  duties  beside  the  mere 
appraisal  of  real  estate;  and  the  parcels  are  the  number 
of  lots  into  which  the  city  is  divided,  and  this  includes 
both  lots  and  buildings.  Boston  is  high  because  of  the 
irregular  character  of  its  property,  and  the  smaller  pro¬ 
portion  of  ordinary  residential  areas  within  the  actual  city 
limits.,, 

THE  ASSESSMENT  OF  PROPERTY  FOR  TAXATION  IS  A 
GOVERNMENTAL  FUNCTION. 

The  exploitation  for  private  profit  of  a  public  servivce  that  is 
lirectly  responsible  for  determining  the  values  of  property  for 
axation  cannot  be  condemned  too  strongly.  It  is  a  return  to  the 
system  in  vogue  in  ancient  Persia  when  despots  farmed  out  the 
jollection  of  taxes  to  petty  satraps.  It  will  tend  to  transform  those 
yho  exercise  the  power  of  taxation  into  farmer-generals,  a  priv- 
leged  class  in  France  before  the  Revolution  of  1789,  who  farmed 
r  leased  the  public  revenues  of  the  nation  and  were  guilty  of 
;reat  extortion. 

I  endorse  most  emphatically  the  following  statement  made  by 
tr.  A.  C.  Pleydell  in  writing  upon  this  subject: 

“The  assessment  of  property  for  taxation  is  a  govern¬ 
mental  function  which  should  not  be  contracted  out  to  pri¬ 
vate  individuals.  To  determine  the  relative  values  of  real 

25 


estate  requires  the  exercise  of  judgment  and  discretion, 
and  involves  not  merely  the  doing  of  justice  between  indi-  | 
vidual  property  owners,  but,  also,  the  determination  of  the 
amount  of  their  contributions  to  the  public  revenues.  This 
is  too  serious  and  vital  a  matter  to  be  turned  over  to  con¬ 
tractors,  however  well  qualified  they  might  be  to  furnish 
technically  correct  valuations. 

“If  assessment  conditions  in  any  city  are  bad,  they  will 
not  be  permanently  corrected  by  bringing  someone  from 
the  outside  to  make  a  valuation  by  a  method  of  their  own, 
for,  in  subsequent  years,  the  same  inequalities  will  appear. 

The  only  way  to  secure  good  assessments  is  to  have  pub- 
lie  officials  who  are  capable  of  doing  their  work,  and  hav- 
ing  them  work  out  a  system  which  can  be  used  by  them 
and  their  successors.” 

In  view  of  the  foregoing,  I  recommend  that  the  proposed  con* 
mittee  on  “Tables,  rules  and  directions  for  determining  the  taxibl; 
value  of  real  property”  be  instructed  to  devise  and  recommend  a| 
necessary  forms  for  maps,  field  books,  records  and  other  offic? 
utilities  designed  to  render  the  work  of  determining  and  registering 
values  continuous,  accurate  and  economical. 

In  case  any  person  becomes  known  to  said  committee  as  posses^ 
ing  exceptional  ability  for  such  work,  I  recommend  that  he  b 
employed  to  aid  the  committee  in  its  work,  and  also,  wffien  r^ 
quested,  to  visit  the  assessment  departments  of  cities  and  countie 
for  the  purpose  of  instructing- taxing  officials  in  the  practical  us 
of  the  tables,  rules  and  directions,  and  in  the  preparation  and  us 
of  maps,  field  books,  records  and  other  official  utilities  devised  anJ 
recommended  by  the  committee,  to  the  end  that  the  best  method! 
developed  by  study  and  experience  may  be  placed  at  the  service  oi 
every  city,  county,  state  and  province  without  exploitation  by  prj 
vate  individuals  or  corporations. 

POSITION  OF  REAL  ESTATE  IN  THE  TAXATION  SYSTEM,  j 

Real  property  is  the  fundamental  basis  of  every  system  of  taxa 
tion.  It  is  tangible.  Its  location  is  fixed  without  power  of  re 
moval.  Every  dollar  required  to  be  raised  by  taxation,  that  canno 
be  obtained  from  other  sources,  must  be  and  is  obtained  from  th< 
taxation  of  real  property. 


26 


Those  who  seek  to  secure  an  unjust  advantage  through  under* 
aluing  real  property  do  not  secure  as  large  a  reward  as  their 
tort-sighted  policy  leads  them  to  believe  they  obtain,  because 
ie  tax  rate  is  determined  by  the  total  value  of  the  tax  list  and  the 
mount  of  money  to  be  raised.  Every  decrease  in  the  total  of  the 
jx  list  increases  the  tax  rate  on  all  property,  including  real  estate. 
The  temptation  to  practice  tax  evasion  by  the  undervaluation  of 
3al  property,  and  by  the  undervaluation  or  secretion  of  personal 
roperty,  increases  in  proportion  to  the  increase  in  the  tax  rate. 

It  is  easier  to  evade  taxation  by  undervaluing,  secreting  or  re- 
loving  personal  property  beyond  the  jurisdiction  of  taxing  officials 
lan  it  is  to  evade  taxation  by  undervaluing  real  property;  there- 
>re,  the  custom  of  undervaluation  is  more  favorable  to  personal 
roperty  than  it  is  to  real  property. 

Undervaluing  real  property  justifies  and  compels  the  undervalua- 
on  and  secretion  of  personal  property. 

The  just  rule  that  all  property  shall  be  taxed  on  the  basis  of  its 
rue  value  requires  that,  whenever  real  property  is  taxed  on  the 
asis  of  any  per  cent  of  its  true  value,  all  other  property  shall  be 
axed  on  the  same  basis.  In  view  of  this  fact  it  is  folly  to  single 
ut  a  certain  class  of  property  to  be  valued  under  drastic  rules 
esigned  to  result  in  a  top-notch  value  assessment  without  bringing 
he  valuation  of  all  property  up  to  the  same  standard.  The  re- 
uirements  of  justice  will  not  permit  this  to  be  done. 

No  owner  of  real  property  has  a  moral,  he  should  have  no  legal, 
ight  to  contend  that  property  owned  by  public  utility  corporations, 
r  that  any  other  class  of  property,  should  be  taxed  on  full  value 
rhen  his  own  property  is  not  so  taxed. 

Several  cases  have  been  decided  by  United  States  courts  re- 
uiring  a  reduction  of  full  value  assessments  of  certain  property  to 
ie  same  per  cent  by  which  general  property  was  under  valued. 
Mr.  Edward  R.  O’Malley,  Attorney-General  for  the  State  of  New 
ark,  referring  to  the  settlement  of  franchise  tax  cases  where  the 
ranchise  had  been  taxed  at  full  value  by  the  State  Tax  Commis- 
ion,  in  a  letter  addressed  to  the  district  prosecuting  attorney  of 
Tassau  county,  under  date  of  May  10,  1910,  says: 

“Upon  the  investigation  of  these  cases  it  developed  that 
the  relator  would  give  evidence  upon  the  trial  that  real 
property  in  the  town  of  Hempstead  is  assessed  by  the  local 
assessors  at  from  10  to  25  per  cent  of  its  full  value. 

27 


“The  result  was  we  were  obliged  to  settle  the  assess¬ 
ments  mentioned  at  37 y2  per  cent  for  the  year  1908,  and 
35  per  cent  of  the  assessment  for  the  year  1909.  These  set¬ 
tlements  were  certainly  favorable  to  the  town,  in  vivew  of 
the  fact  that  real  property  is  assessed  so  low.” 

Mr.  J.  E.  Frost,  president  of  the  State  Board  of  Tax  Commis 
sioners  for  the  State  of  Washington,  in  an  official  letter  date*: 
December  1,  1909,  says: 

“The  ratio  of  assessed  to  actual  value  is  ascertained  by 
this  board,  and  the  operating  property  of  the  railroads, 
street  railroads,  telegraphs  and  other  public  service  con¬ 
cerns  assessed  by  this  board,  is  assessed  and  equalized  in 
the  various  counties  throughout  the  state  at  the  same  pro¬ 
portion  of  its  actual  value  as  general  property  is  assessed.” 

The  fundamental  first  step  necessary  to  exterminate  the  evil  ot 
tax  evasion  by  undervaluation  and  omission  in  all  of  its  forms  i 
to  make  it  certain  that  real  property  is  assessed  at  its  true  value 
The  doing  of  this  will  establish  a  just  basis  for  demanding  that  al 
other  property  shall  be  taxed  at  its  true  value,  and  the  reduced  tai 
rate  so  induced  will  render  it  possible  for  the  owners  of  othe 
classes  of  property  to  pay  the  tax  required  without  suffering  con 
fis  cation. 

CAUSES  AND  EFFECTS  OF  HIGH  TAX  RATES. 

(1)  Undervaluation  of  real  property  is  the  fundamental  cause  o 
high  tax  rates.  It  is  absolutely  necessary  to  increase  a  tax  rate  ir 
proportion  to  the  decrease  of  the  total  of  the  tax  list,  caused  bj 
undervaluation,  in  order  to  raise  the  amount  of  money  required. 

(2)  Values  of  real  property,  fixed  for  more  than  one  year,  make 
it  necessary  to  provide  for  growing  needs  by  levying  a  tax  on  2 
basis  from  which  all  growth  in  the  value  of  real  property  is  ex 
eluded  for  the  period  the  assessment  is  allowed  to  stand  unchanged 
This  forces  an  increase  in  the  tax  rate  from  year  to  year. 

(3)  The  custom  of  under  valuing  real  property  justifies  and 
makes  necessary  the  custom  of  under  valuing  or  omitting  personal 
property.  This  results  in  still  further  decreasing  the  total  of  the 
tax  list  and  compels  a  corresponding  increase  in  the  tax  rate. 

(4)  It  is  not  possible  to  under  value  real  property  In  the  same 
proportion  that  it  is  possible  to  under  value  or  omit  personal  propi 
erty.  Therefore,  the  vicious  method  of  tax  evasion  by  under  valu- 

28 


ng  real  property  results  in  the  payment  of  a  larger  proportion  of 
;he  total  tax  by  the  owners  of  real  property  than  they  will  pay 
vhen  real  property  is  assessed  at  its  true  value  and  the  tax  rate  is 
jorrespondingly  decreased. 

(5)  The  combined  effect  of  these  causes  has  resulted  in  raising 
he  average  tax  rate  in  Ohio  from  10.7  mills  in  1851,  when  the 
State  Constitution  was  adopted,  to  30  mills  in  1900,  a  rate  that  com- 
jels  the  undervaluation  or  omission  of  personal  property. 

CUSTOM  FAVORS  TAX  EVASION  BY  UNDER-VALUATION. 

The  moral  and  economic  development  of  the  people  still  gives 
'reed  mastery  over  patriotic  civic  duty. 

Custom  still  holds  mastery  over  organic  and  statutory  law  and 
ustifies  taxpayers  in  evading  lawful  requirements  through  induc- 
ng  assessors  to  disregard  the  law  by  placing  the  assessed  value  of 
heir  property  on  the  tax  list  at  the  lowest  figures  they  dare  to 
nake. 

Custom  not  only  approves  the  action  of  assessors  in  favoring 
heir  friends  and  neighbors  by  under  valuing  their  property,  but  it 
ipplauds  them  for  attempting  to  serve  the  general  interests  of 
heir  township,  village  or  city  by  aiding  the  taxpayers  in  such  dis¬ 
tricts  to  evade,  by  means  of  undervaluation,  the  payment  of  a  part 
>f  their  just  share  of  county  taxes. 

Gathering  strength  by  every  step  taken  in  broadening  its  base, 
iustom  applauds  with  increased  ardor  the  so-called  patriotism  of 
jounty  officials  who  are  most  successful  in  aiding  their  county  to 
escape  the  payment  of  a  part  of  their  just  share  of  state  taxes  by 
neans  of  securing  approval  from  the  state  board  of  equalization 
>f  the  most  heavily  under  valued  county  tax  list. 

DISHONESTY  REWARDED— HON  ESTY  PENALIZED. 

Governed  by  custom,  instead  of  the  requirements  of  correct  moral 
md  economic  principles  and  statutory  law,  dishonest  taxpayers  who 
successfully  evade  the  payment  of  a  part  of  their  just  share  of  taxa- 
ion  by  securing  undervaluation  are  rewarded,  and  honest  tax- 
•ayers  who  aid  assessors  in  listing  their  property  at  true  value  are 
tenalized  by  the  amount  of  the  tax  so  evaded. 

In  the  past  the  law  has  provided  no  adequate  means  for  enforc- 
ng  the  constitutional  provision  requiring  the  assessment  of  all 
iroperty  at  true  value;  it  has  permitted  individual  taxpayers,  and 

29 


taxing  districts,  to  reap  the  rewards  of  successful  evasion  through 
corresponding  decrease  in  the  amount  of  their  tax  bills,  and  hi 
penalized  honest  taxpayers  who  have  not  resorted  to  evasion  b 
undervaluation  by  compeling  them  to  pay,  in  addition  to  their  owi 
full  share  of  the  tax,  enough  more  to  make  good  the  loss  of  revenu 
caused  by  the  under-valuation  secured  by  others. 

The  fact  that  those  who  seek  undervaluation  are  always  activ< 
while  those  who  desire  honest  administration  of  the  law  are  alway 
passive  because  they  expect  the  assessor  to  place  their  property  of 
the  tax  list  at  its  true  value,  accounts  for  a  majority  of  the  horribli 
examples  of  tax  evasion  found  in  every  list  of  taxable  property 
This  is  the  fundamental  cause  of  unequal  assessments  and  of  i£j 
justice  between  taxpayers. 

TANGIBLE  SAVINGS — INTANGIBLE  LOSSES. 

Savings  secured  by  dishonest  tax  evasion  are  tangible.  Lossef 
caused  by  dishonest  tax  evasion  are  intangible. 

The  dishonest  taxpayer  who  succeeds  in  cutting — say  $100 — o: 
of  his  tax  bill,  through  securing  an  undervaluation  of  his  propertjj 
knows  the  amount  of  his  saving.  He  does  not  permit  his  cor 
science  to  be  disturbed  by  thinking  far  enough  to  discover  that  hi 
has  made  this  gain  only  by  filching  that  amount,  by  due  process  o1 
law,  from  the  pockets  of  his  neighboring  taxpayers. 

The  honest  taxpayer  whose  tax  bill  is  increased  by  reason  of  th< 
savings  others  are  making  through  evasion  secured  by  undervalii 
ation,  does  not  know  the  precise  amount  of  his  loss.  He  knows  j 
high  tax  rate  has  caused  him  to  pay  a  large  tax  bill,  but  he  doei 
not  know  why  the  tax  rate  is  higher  than  it  should  be.  He  simpl^ 
grumbles  and  subsides.  His  failure  to  study  the  problem  with  suf! 
ficient  care  and  intelligence  to  enable  him  to  discover  precisely 
why  and  how  he  is  victimized  also  prevents  him  from  knowing 
precisely  how  work  for  the  improvement  of  tax  laws  is  a  direci 
benefit  to  him.  He  is  the  victim  of  the  greed  of  dishonest  tax 
payers  on  the  one  hand,  and  of  his  own  lack  of  intelligent  attention 
to  his  civic  duty  on  the  other  hand. 

CUMULATIVE  SAVINGS  AND  LOSSES. 

When  an  appraisement  is  made  annually,  the  gain  by  dishonesty 
is  the  amount  saved  by  undervaluation  for  one  year. 

When  the  appraisement  is  made  for  a  fixed  period  of  years,  the 
amount  so  saved  is  multiplied  by  the  number  of  years  in  the  period. 

30 


I 

This  shows  that  in  practical  operation,  the  law  says  to  the  dis- 
lonest  taxpayer,  “If  you  can  secure  an  undervaluation  of  sufficient 
.mount,  your  saving  will  be  $100  on  an  annual  appraisement;  $400 
n  a  quadrennial  appraisement;  and  $1000  on  a  decennial  appraise- 
dent  ”  It  also  shows  that  the  practical  effect  of  permitting  these 
avings  by  undervaluation  is  to  penalize  the  honest  taxpayer  in 
precisely  the  same  way  and  to  the  same  degree.  If  his  tax  bill  is 
acreased  by  $100  on  account  of  undervaluation  practiced  by  others 
n  an  annual  appraisement,  his  loss  will  be  $400  on  a  quadrennial 
ppraisement,  and  $1000  on  a  decennial  appraisement. 

>  AVINGS  BY  UNDERVALUATION  INCREASE  IN  PROPORTION 
TO  THE  VALUE  OF  THE  PROPERTY  AFFECTED. 

This  detail  of  the  subject  cannot  be  properly  dismissed  without 
•ailing  attention  to  the  fact  that  the  savings  secured  by  under- 
raluation  increase  in  proportion  to  the  length  of  the  period  for 
riiich  the  appraisement  is  made,  and  also  in  proportion  to  the 
ralue  of  the  property  affected. 

A  property  the  true  value  of  which  is  $1000,  taxed  at  3  per  cent, 
rill  bring  its  owner  a  tax  bill  for  $30.  If  he  can  get  that  property 
>n  the  tax  list  at  50  per  cent  of  its  true  value,  the  tax  rate  remain- 
ng  the  same,  his  tax  bill  will  show  a  saving  of  $15.  But  his  effort 
o  secure  this  saving  may  cost  him  so  much  in  time  employed  and 
expenses  incurred  as  to  leave  him  practically  no  inducement  to 
nake  the  effort,  if  the  saving  can  be  realized  for  but  one  year, 
f,  however,  he  can  secure  this  saving  for  four  or  ten  years,  he 
nay  calculate  that  he  can  obtain  a  substantial  reward  if  his  effort 
o  secure  the  undervaluation  is  successful  and  he  may  make  the 
ittempt.  Men  of  small  means,  however,  are  not  accustomed  to 
making  close  calculations  of  this  kind,  and  seldom,  if  ever,  do  so. 

The  case  of  large  taxpayers  is  radically  different.  A  property 
he  true  value  of  which  is  $100,000,  taxed  at  3  per  cent,  will  bring 
ts  owner  a  tax  bill  for  $3000.  If  he  can  get  that  property  on  the 
ax  list  at  50  per  cent  of  its  true  value,  the  tax  rate  remaining  the 
same,  his  tax  bill  will  show  a  saving  of  $1500  for  one  year.  This  is 
sufficient  to  pay  for  considerable  time  employed  and  expense  in- 
iurred  in  an  attempt  to  secure  this  gain.  If,  however,  the  appraise- 
nent  is  for  a  four-year  period,  the  saving  will  be  $6000;  and  if  for 
i  ten  year  period  it  will  be  $15,000.  This  inducement  is  sufficiently 
strong  to  make  an  attempt  to  secure  an  undervaluation  a  cer- 

31 


tainty,  especially  while  neither  the  law  nor  custom  classes  gain 
made  by  tax  evasion,  secured  by  undervaluation  or  otherwise 
with  gains  made  by  stealing  and  fails  to  brand  the  beneficiary  c 
such  gain  as  a  thief. 

I 

GREATER  GAINS  CAN  BE  MADE  BY  FULL  VALUATIONS, 
REDUCED  TAX  RATES  AND  LIMITED  EXPENDITURES 
THAN  BY  UNDER-VALUATIONS. 

The  State  of  West  Virginia  reduced  the  average  tax  rate  for  al 
purposes,  by  making  full  valuations  and  limiting  expenditures 
from  21.5’^  mills  in  1904  to  8.4%  mills  in  1908. 

Taught  by  this  example,  the  State  of  Ohio  is  now  endeavoring  t( 
reduce  its  average  tax  rate  for  all  purposes,  by  making  full  valua 
tions  and  limiting  expenditures,  from  30-f  mills  in  1909  to  less  thar 
10  mills  in  .1911.  There  is  no  reasonable  doubt  of  its  success  if  the 
Tax  Commission  of  Ohio  will  enforce  obedience  to  the  law  as  it  has 
been  given  power  to  do. 

When  large  taxpayers  understand  the  problems  of  taxation  cor 
rectly,  they  will  cease  to  employ  expert  and  austute  attorneys  tc 
secure  reductions  in  their  tax  bills  by  means  of  undervaluation 
They  will  reverse  the  process  and  will  seek  to  reduce  their  tax 
bills  by  employing  attorneys  and  experts  to  see  that  all  inequalities 
between  taxpayers  are  abolished  through  the  listing  of  all  property 
at  full  value,  and  that  increased  expenditures  are  not  permitted. 
They  will  make  it  certain  that  the  saving  they  covet  is  made 
through  a  reduced  tax  rate,  made  possible  by  a  full-value  tax  list. 

The  law  makes  it  the  duty  of  every  taxpayer  to  call  the  attention 
of  city  and  county  boards  of  equalization,  and  of  the  state  tax  com¬ 
mission,  to  any  undervaluation  or  to  the  omission  of  any  property 
from  the  tax  list  of  which  he  has  knowledge. 

Any  taxpayer  who  fails  to  perform  his  duty  in  this  respect  can¬ 
not  consistently  complain  if  the  failure  of  public  officials  to  intelli¬ 
gently  perform  their  duty  results  in  injustice  to  himself. 

When  every  taxpayer  does  his  duty  to  himself  and  to  his  town¬ 
ship,  village,  city,  county  and  state  in  the  manner  herein  indicated, 
the  number  of  persons  who  are  now  saying  they  do  not  see  how  the 
work  done  and  being  done  to  improve  tax  laws  is  of  any  direct 
benefit  to  them  will  be  reduced  to  a  minimum;  and  disrespect  for 
law,  shown  by  tax  evasion,  will  cease  to  be  a  controlling  evil,  pre¬ 
venting  a  just  administration  of  tax  laws. 

32 


Undoubtedly  the  situation  is  full  of  difficulties.  None  know  bet¬ 
ter  than  those  engaged  in  administrative  duties  that  there  is  no 
short  cut  to  success;  no  simple  principle  of  action  that  can  be 
stated  in  a  half-hour’s  talk,  except  it  be  to  organize  for  the  crea¬ 
tion  of  a  masterful  public  sentiment  and  co-operate  with  all  public 
officials  to  secure  an  intelligent,  effective  and  state-wide  enforce¬ 
ment  of  all  of  the  requirements  of  law. 

AN  UNSUCCESSFUL  ATTEMPT  TO  REDUCE  THE  TAXATION 
OF  REAL  PROPERTY  BY  THE  IMPOSITION  OF 
EXCISE  TAXES. 

The  effort  to  reduce  the  taxation  of  real  property  by  the  attempt 
to  enforce  a  drastic  tax  inquisitor  law  has  been  shown  to  be  a 
failure. 

Another  mistaken  effort  to  reduce  the  taxation  of  real  property 
was  initiated  in  1896  by  the  enactment  of  a  law  assessing  an  excise 
tax  for  state  purposes  of  one-half  of  1  per  cent  on  the  gross  earn¬ 
ings  of  railroad  corporations. 

In  1902,  under  the  leadership  of  Governor  George  K.  Nash,  with¬ 
out  any  economic  necessity,  purely  for  “buncombe”  expressed  by 
the  political  demand  that  “The  burden  of  taxation  should  be  re¬ 
duced  for  the  farmer  and  small  home  owner,”  this  excise  tax  was 
increased  100  per  cent  and  its  operation  was  extended  to  all  public 
utility  corporations.  At  the  same  time  a  new  excise  tax  for  state 
purposes  of  one-tenth  of  1  per  cent  was  assessed  on  the  par  value 
of  the  outstanding  capital  stock  of  all  corporations  organized  for 
profit,  other  than  public  utility  corporations,  and  the  tax  on  insur¬ 
ance  premiums  was  increased  and  wholly  appropriated  for  state 
purposes. 

In  1910  the  state  excise  tax  on  public  utility  corporations  was 
re-arranged  to  make  the  tax  apply  to  gross  earnings  from  intrastate 
business  only.  The  effect  of  the  re-arrangement  will  be  to  decrease 
the  amount  of  the  tax  paid  by  some  corporations  and  to  increase 
it  for  others,  without  increasing  (it  may  decrease)  the  amount  of 
state  revenue  from  this  source.  At  the  same  time  the  state  excise 
tax  on  corporations  for  profit  was  increased  50  per  cent. 

It  was  the  purpose  of  Governor  Nash  to  reduce,  and  finally  to 
abolish  the  direct  state  general  property  tax,  by  means  of  special 
excise  taxes  levied  exclusively  for  state  purposes.  In  doing  this 
he  attempted  to  follow  the  example  of  New  York. 

33 


I  did  my  best  to  convince  Governor  Nash  that  his  policy  could 
not  succeed  because  revenue  derived  by  excise  taxes  would  induce 
extravagance,  as  there  was  no  way  to  hold  appropriations  in  check, 
members  of  the  Legislature  feeling  no  restraint  from  their  con¬ 
stituents  who  did  not  themselves  feel  a  direct  burden  from  the 
tax.  I  strongly  urged  him  to  adopt  the  policy  of  abolishing  the 
direct  state  property  tax  completely  by  substituting  for  it  a  direct 
state  tax  on  the  annual  expenditures  of  all  local  taxing  bodies,  thus 
shifting  the  pressure  of  taxation  from  valuation  of  local  incomes 
expressed  by  local  expenditures.  Such  a  tax  would  tend  to  restrain 
extravagance  on  the  part  of  the  state  and  also  on  the  part  of  local 
taxing  bodies,  because  they  would  at  once  feel  the  pressure  of  the 
tax  and  would  realize  that  the  less  they  expended  the  smaller 
would  be  their  proportion  of  total  state  requirements. 

In  1900  the  total  appropriations  for  state  purposes  made  by  the 
New  York  Legislature  was  $23,934,000.  The  appropriations  made 
by  the  Legislature  of  New  York  at  its  regular  session  for  1910 
exceeded  $42,000,000. 

In  his  message  convoking  the  Legislature  in  extraordinary  ses¬ 
sion  in  June,  1910,  Governor  Hughes  suggested  to  that  body  that  it 
“take  up  the  whole  subject  of  state  finances  and,  particularly,  that 
it  consider  the  question  of  a  return  to  the  plan  of  direct  taxation 
on  real  and  personal  property.”  (Editorial:  New  York  Commercial, 
July  26,  1910.) 

The  total  appropriation  for  the  State  of  Ohio  for  the  year  1902 
was  $6,166,552.99.  The  total  appropriation  for  1910  was  $9,056,- 
650.71;  an  increase  of  46.86-)-  per  cent  in  eight  years. 

1896. 

. $1,741,028,437  00 

.  40,638,200  74 

. 23.34  -f  mills. 

1902. 

. $1,990,885,388  00 

.  47,658,208  89 

. 23.94 —  mills. 

1909. 

Total  Duplicate  . $2,389,978,349  00 

Taxes  Collected  .  71,706,370  88 

Tax  Rate  . 30 -|-  mills. 

34 


Total  Duplicate 
Taxes  Collected 
Tax  Rate  . 

Total  Duplicate 
Taxes  Collected 
Tax  Rate  . 


This  shows  the  failure  of  the  attempt  to  reduce  the  taxation  of 
real  property  by  the  imposition  of  special  state  excise  taxes,  and 
gives  apportunity  again  to  recommend  the  policy  of  obtaining  all 
needed  state  revenue  by  a  direct  state  tax  on  the  total  annual  ex¬ 
penditures  of  all  local  taxing  bodies.  This  will  be  a  practical  appli¬ 
cation  of  the  income  tax  principle. 

THE  RESULT  OF  SIXTY  YEARS  OF  EXPERIENCE. 

The  proportion  of  taxes  paid  on  the  grand  duplicate  by  real  and 
personal  property  was-  as  follows: 

1850,  Real  Property,  77.8%;  Personal  Property,  22.2% 

1900,  Real  Property,  69.4%;  Personal  Property,  30.6% 

1909,  Real  Property,  67.76%;  Personal  Property,  32.24% 

This  comparison  becomes  strikingly  instructive  when  it  is  known 
that  there  is  included  in  the  personal  property  statement,  sixty 
years  of  development  in  the  value  of  the  personal  property  of  all 
railroads,  telegraph,  telephone,  electric  light  and  other  modern 
utilities,  as  well  as  of  all  industrial  enterprises  of  every  kind,  and 
all  real  estate  used  by  them  in  the  operation  of  their  business. 

In  1851,  the  year  in  which  the  present  constitution  of  Ohio  was 
adopted,  the  average  tax  rate  for  the  state,  for  all  purposes,  state 
and  local,  was  10.7  mills.  In  1909  it  was  30+  mills.  The  effort  of 
today  is  to  return  to  the  rate  of  1851  which  was  departed  from  by 
under  valuing  real  property,  which  increased  the  rate  and  pre¬ 
vented  personal  property  from  paying  its  full  share  of  taxation. 

Commenting  on  these  condition^,  the  Hon.  James  Garfield  made 
the  following  statement  in  the  address  previously  mentioned: 
“Another  evil  which  has  developed  from  the  conditions  is 
the  great  lack  of  uniformity  in  valuation.  The  property 
which  suffers  most  under  these  conditions  is  real  estate 
and  the  personal  property  which  cannot  be  secreted.” 

FUTURE  WORK  GUIDED  BY  EXPERIENCE. 

This  discussion  of  taxation  work  and  experience  in  Ohio  shows 
the  steps  that  have  been  successfully  taken  to  improve  tax  laws. 
It  as  clearly  indicates  that  the  steps  which  must  be  taken  to  still 
further  improve  these  laws  and  to  secure  the  benefits  derivable 
from  such  improvements  are  as  follows: 

(1)  Public  sentiment  and  the  voluntary  action  of  organized  tax¬ 
payers,  co-operating  with  public  officials  of  all  classes,  must  make 
it  certain  that  tax  evasion  by  undervaluation  shall  cease. 

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(2)  Public  sentiment  and  the  voluntary  action  of  taxpayers,  co- 
operating  with  public  officials  of  all  classes,  must  make  it  certain 
that  no  more  money  shall  be  raised  in  any  taxing  district  on  the  tax 
list  for  1911  than  was  raised  on  the  tax  list  for  1910,  plus  6  per  cent. 

(3)  When  the  total  of  the  real  property  section  of  the  tax  list 
has  been  fixed  for  1911,  as  a  result  of  the  work  done  In  administer¬ 
ing  the  quadrennial  appraisement  law,  public  sentiment  and  the 
voluntary  action  of  taxpayers,  co-operating  with  public  officials  of  all 
classes,  must  make  it  certain  that  all  personal  property  that  can 
be  discovered  is  entered  on  the  tax  list  at  its  true  value  and  that 
in  this  way  it  shall  pay  its  just  share  of  taxation  and  contribute  its 
just  portion  in  making  up  the  total  of  the  tax  list,  thus  making  it 
possible  to  reduce  the  tax  rate  to  the  lowest  practicable  limit  for 
the  year  1911. 

Voicing  what  I  believe  to  be  the  heartfelt  desire  of  the  people  of 
Ohio,  I  formulate  the  teachings  of  their  experience  in  the  following 
propositions : 

(1)  All  property,  real  and  personal,  should  be  entered  on  the  tax 
list  at  its  true  value. 

(2)  No  more  money  should  be  raised  on  the  tax  list  for  1911,  in 
any  taxing  district,  than  was  raised  in  1909,  plus  6  per  cent. 

(3)  The  tax  rate  assessed  on  the  tax  list  for  1911  should  be  the 
lowest  per  cent  that  will  produce  as  much  revenue  for  that  year 
as  was  produced  by  the  rate  assessed  on  the  tax  list  for  1909,  plus 
6  per  cent. 

It  is  my  judgment,  when  these  propositions  are  intelligently  and 
effectively  applied  in  the  administration  of  its  tax  laws,  that  the 
average  rate  for  all  purposes  in  Ohio  for  the  year  1911  will  be 
materially  less  than  1  per  cent. 

GENERAL  CONCLUSIONS. 

(1)  To  secure  justice  between  taxpayers  by  an  intelligent,  ef¬ 
fective  and  an  economical  administration  of  the  general  property 
tax,  it  is  absolutely  necessary  to  develop  into  a  profession  the 
work  of  determining  the  values  of  property  for  taxation,  and  of 
levying  and  collecting  taxes  by  means  of  city,  county  and  state 
officials  appointed  regardless  of  political  affiliations,  who  shall  hold 
office  for  not  less  than  six  years  with  the  privilege  of  re-appoint¬ 
ment,  and  who,  in  consideration  of  reasonable  salaries,  shall  be  re¬ 
quired  to  devote  their  entire  time  to  the  duties  of  their  office. 

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(2)  To  secure  a  just  contribution  for  the  support  of  government 
from  all  classes  of  taxable  property,  it  is  necessary  to  classify  and 
tax  all  subjects  of  taxation  in  conformity  with  their  economic 
characteristics. 

(3)  To  cause  a  tax  system  to  promote,  instead  of  restrain  the 
development  of  all  forms  of  production  and  distribution,  inde¬ 
pendent  action  must  be  secured  for  state  and  local  governments  by 
assigning  specific  subjects  of  taxation  to  the  jurisdiction  of  each, 
so  that  no  subject  shall  be  taxed  by  more  than  one  taxing  authority; 
and  to  permit  the  selection  of  those  subjects  for  taxation,  the 
taxation  of  which  will  most  equitably  diffuse  the  expenses  of  gov¬ 
ernment  among  the  people  of  each  community. 

(4)  To  give  stability  and  efficiency  to  its  taxation  system,  it 
should  be  the  policy  of  a  state  to  classify  for  taxation  all  corpora¬ 
tions  organized  for  profit  and  to  assess  each  class  by  a  law  having 
uniform  application  throughout  the  state,  although  the  tax  may 
be  collected  locally  in  some  cases,  at  a  fixed  initial  rate  with  an 
added  differential,  computed  on  a  simple,  clearly-stated  and  easily 
verified  mathematical  basis  which  will  avoid  the  uncertainties  of 
the  judicial  discretion  of  taxing  officials  and  relieve  taxpayers  from 
unnecessary  accounting  and  annoyances  in  making  their  tax  returns,. 

The  taxes  so  levied  should  be  in  lieu  of  all  taxation  of  the 
corporation  or  its  property  in  any  other  form,  excepting  the  taxa¬ 
tion  of  its  real  estate,  which  should  be  subject  to  local  taxation  at 
local  rates,  and  should  exempt  from  taxation  the  stocks  and  bonds 
issued  by  the  corporation  so  taxed,  however  owned. 

(5)  All  property  taxable  on  an  ad  valorem  basis  should  be  listed 
for  taxation  at  its  true  value  in  money. 

(6)  Taxpayers  should  acquire  an  effective  control  over  public 
expenditures  through  the  adoption  of  the  budget  system  of  financing 
all  local  and  state  governments. 

(7)  A  uniform  classification  of  the  subjects  of  taxation,  code  of 
laws  and  system  of  administration,  should  be  devised  for  all  states 
in  which  freedom  of  action  is  not  prohibited  by  constitutional 
provision. 

(8)  In  all  states  deprived  of  freedom  of  action  by  constitutional 
provisions,  constitutional  amendments  should  be  proposed  and 


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urged  for  adoption  until  freedom  is  secured.  Such  action  should 
be  based  on  the  opinion  rendered  by  Justice  Brewer  of  the  United 
States  Supreme  Court,  found  in  volume  142,  page  351,  as  follows: 

“A  system  that  imposes  the  same  tax  upon  every  species 
of  property,  irrespective  of  its  nature,  condition,  or  class, 
will  be  destructive  of  the  principles  of  uniformity  and 
equality  in  taxation  and  of  a  just  adaptation  of  property 
to  its  burdens.” 


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